Benchmarks likely to make pessimistic start on Tuesday

Indian markets ended sharply higher on Monday buoyed by a rally in IT bluechips. Besides, firm global as well as domestic cues also supported markets. Today, the markets are likely to make pessimistic start amid lackluster cues from Asian peers. Traders will be concerned about a report that the flow of foreign direct investment (FDI) into India is dropping and may suffer its first full-year decline since Prime Minister Narendra Modi came to power in 2014. Inbound FDI dropped 7% to $33.5 billion in the nine months between April and December 2018, compared with $36 billion in the year-earlier period. There will be some cautiousness with Bibek Debroy, the head of Prime Minister’s economic advisory panel, stating that India lacks good data on economy and jobs as it is majorly an informal economy. Also, there will be negative reaction on domestic ratings agency Icra’s report that India Inc witnessed a dip in both revenue growth as well as margins in the December quarter compared to the preceding three months. The analysis is based on the aggregate numbers reported by 648 listed companies, which shows a revenue growth of 17.3% in Q3 down from 19.4% in the preceding three months. However, traders may take some support later in the day with SBI Research’s report saying that the economy is likely to grow at 6.6-6.7% in the third quarter and 7.2% for the full financial year. The yearly SBI composite index for February saw a marginally rise to 50.60 (a score of under 50 indicates negative growth). Traders may take note of NITI Aayog CEO Amitabh Kant’s statement that upliftment of over 100 aspirational districts can propel India to achieve a growth rate of 9-10% for up to 30 years as it is imperative to have equity for growth to sustain. There will be some buzz in the reality sector stocks with CRISIL Research’s report that even as the latest GST cut on under-construction housing projects is expected to increase demand, real estate developers may see mixed results. It added that the withdrawal of input tax credit (ITC) would impact the profitability of developers. There will be some reaction in sugar sector stocks with India Ratings’ report that even as there is lower sugar production due to deficient rainfall in sugar season (SS) 2018-19, surplus situation continued following high carry-over stock from the last season.

The US markets ended in green on Monday, after President Trump said he would delay a planned increase in tariffs on Chinese goods. Asian markets are trading mixed on Tuesday with several markets slipping as the rush of optimism on US-China trade talks from early Monday faded marginally.

Back home, Indian equity benchmarks were on the mend on the first day of the trading week, with both the larger peers closing higher by over 340 and 80 points, respectively. The market made a firm start, amid reports that the Goods and Services Tax (GST) Council, headed by Union Finance Minister Arun Jaitely, cut tax rate on under-construction housing properties to 5 per cent without input tax credit (ITC), from the existing 12 per cent. This step has been came a big relief to home buyers. Adding optimism among the market participants, Commerce and industry minister Suresh Prabhu said that the government is making a strategy to make India a $5 trillion economy and simultaneously fine tuning the plan to take it to $10 trillion. Traders overlooked Financial Services Secretary Rajiv Kumar’s statement that ensuring intermediation by financial institutions like banks and NBFCs in a clean manner is one of the major challenges faced by the Indian banking sector. He added that making credit rating agencies more accountable is also another challenge. In the second half of the session, the markets rallied further to settle near day’s high points, supported by firm opening of European markets. Domestic sentiments got boost as the Government is launching the Pradhan Mantri Kisan Samman Nidhi (PM-KISAN), to provide an assured income support to the small and marginal farmers. Under this programme, vulnerable landholding farmer families, having cultivable land upto 2 hectares, will be provided direct income support at the rate of Rs 6,000 per year. Traders also took encouragement with report that the Central Board of Indirect Taxes and Customs (CBIC) constituted three Working Groups to study and recommend measures to facilitate trade, promote exports and improve compliance. The Working Groups will focus on improving the legislative structure of customs tariff and update it to suit the emerging and future needs of the economy and industry. Special focus would be given to create a comprehensive export tariff structure to enhance India’s export competitiveness. Finally, the BSE Sensex gained 341.90 points or 0.95% to 36,213.38, while the CNX Nifty was up by 88.45 points or 0.82% to 10,880.10.